Yahoo Finance Chancellor Philip Hammond accused of breaking national insurance manifesto pledge
Philip Hammond’s first – and last – spring Budget has created his first political storm.
While the Chancellor cheered Tory backbenchers with more money for education and social care, those same backbenchers were shifting uncomfortably on their seats as he hit the booming self-employed sector with hefty rises in national insurance contributions.
Many Conservative MPs will be aware that entrepreneurs have been a driving force in job creation since the 2008 financial crash.
Latest figures show some 4.5 million people are now self-employed, up from 3.8 million in 2008 – but they have been at an unfair advantage in the workplace, according to Mr Hammond.
To bring their tax treatment in line with employed workers who pay a national insurance rate of 12%, the self-employed will see their contributions rise from 9% to 10% in April 2018 and 11% in 2019.
Mr Hammond said self-employment was to cost the Treasury £5bn this year through lower NICs – and he appears to have broken a Tory manifesto pledge to raise it.
https://twitter.com/SteveJonesPA/status/839477182850301952
A tax on “some of Britain’s hardest working people”
The rise from 9% to 11% will cost self-employed taxpayers an extra £325m in 2018-19, £645m in 2019-20, £595m in 2020-21 and £495m in 2021-22.
That matches the £2bn committed to fund extra social care provision over the next three years that Mr Hammond also announced.
The change will leave 2.84 million people facing an average annual increase of £240.
“News of another National Insurance revamp will come as unwelcome news to anyone that’s self-employed,” said Hannah Maundrell, editor in chief of money.co.uk.
“This may mean some people need to re-evaluate whether it’s worth continuing to trade.”
Mr Hammond also made moves that will hit directors but also small shareholders, with the limit on tax-free dividends being slashed from £5,000 to £2,000.
Liberal Democrat shadow chancellor Susan Kramer branded the NI increase a tax on entrepreneurs. “This is a tax on builders, taxi drivers and window cleaners, some of Britain’s hardest working people,” she said.
“This hits the gig economy where people are already insecure and facing rising prices and job uncertainty.”
“Subscription traps”
Elsewhere, the mixed message for consumers continued in the shape of roaming charges and subscription services.
Responding to calls from consumer watchdogs, Mr Hammond pledged a crackdown on “subscription traps”, where customers sign up for a 30-day trial on a streaming service, for example, but choose not to take up the full offer.
Often consumers unwittingly end up paying through direct debit for months for something they are not using.
The contracts the move is believed to target are used by companies to automatically sign customers up for goods and services, often after a free trial period.
Mr Hammond said companies would be told to “simplify Ts and Cs” and consumer bodies would be given “greater powers”.
According to Citizens Advice, some two million people are caught up in the red tape nightmare.
Bad news for British holidaymakers
From August this year, those using their mobile phone in countries outside the EU will see a 20% VAT bill slapped on calls and other roaming services.
With Brexit looming, it is not clear whether this will apply to all EU countries once Britain leaves the Bloc – or whether Britons will benefit from EU moves to phase out roaming charges within it.
“It may have been the last spring Budget but the Chancellor didn’t make it go with a bang,” added Maundrell.
“There were few surprises, few giveaways and little to celebrate or commiserate. He’s keeping the cash he has managed to bank in his pocket and biding his time to see how this summer plays out.
“Anyone that’s self-employed will be shocked at the prospect of more jiggery pokery with their National Insurance contributions; many will be booking in to see their accountants as we speak.”
Mr Hammond – nicknamed Spreadsheet Phil – was boosted by better than expected economic figures that showed he had an extra £16bn to play with.
But true to his cautious nature, he chose not to dip into the bonus pot, perhaps to give himself wriggle room if the triggering of Article 50 has negative impact on finances over the coming months.
To see how the Budget affects your finances, use Blick Rothenberg’s UK Tax Calculator.
